We have audited the attached Balance Sheet of Mangalore Chemicals and
 Fertilizers Limited, Bangalore as at 31st March 2011, the Profit and
 Loss Account and Cash Flow Statement for the year ended on that date
 annexed thereto. These financial statements are the responsibility of
 the Company''s management.  Our responsibility is to express an opinion
 on these financial statements based on our audit.
 
 II. We conducted our audit in accordance with auditing standards
 generally accepted in India. These Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material mis-statements. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation.  We believe that our audit provides a reasonable basis
 for our opinion.
 
 II. As required by the Companies (Auditor''s Report) Order, 2003 issued
 by the Central Government of India in terms of sub-section (4A) of
 section 227 of the Companies Act, 1956, we give in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the said
 order.
 
 IV. Further to our comments in the Annexure referred to above, we
 report that:
 
 1.  We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purpose of the
 audit;
 
 2.  In our opinion, proper books of account as required by Law have
 been kept by the company so far as appears from our examination of
 those books;
 
 3.  The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 4.  The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report comply with the Accounting Standards referred
 to in sub section (3C) of Section 211 of The Companies Act, 1956;
 
 5.  On the basis of written representations received by the company
 from the directors, as on 31st March 2011 and taken on record by the
 Board of Directors, we report that none of the directors are
 disqualified as at 31st March 2011 from being appointed as a director
 under section 274(1) (g) of the Company''s Act, 1956.
 
 6.  Without qualifying our opinion, attention is drawn to note No 8 of
 Schedule 3B (Notes to Accounts), regarding the Concession for Urea and
 Phosphatic Fertilizers being recognized on the basis of estimates.
 
 7.  In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts give the information
 required by the Companies Act, 1956, in the manner so required and give
 a true and fair view in conformity with the accounting principles
 generally accepted in India:
 
 a) in the case of the Balance Sheet, of the state of affairs of the
 company as at 31st March 2011; and
 
 b) in the case of the Profit and Loss Account, of the profit for the
 year ended on that date; and
 
 c) in the case of the Cash Flow Statement, of the cash fows for the
 year ended on that date.
 
 ANNEXURE TO AUDITORS'' REPORT
 (REFERRED TO IN PARAGRAPH III OF OUR REPORT OF EVEN DATE)
 
 a.  The company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets.
 
 b.  The Fixed assets have been physically verified by the management
 during the course of the year and no material discrepancies were
 noticed on such physical verification.
 
 c.  The company has not disposed off any substantial part of the fixed
 assets during the year.
 
 ii. a. The inventory has been physically verified during the year by the
 management. In our opinion the frequency of verification is reasonable.
 
 b.  The procedures of verification of inventories followed by the
 company are reasonable and adequate in relation to the size of the
 company and nature of its business.
 
 c.  The company is maintaining proper records of inventory. The
 discrepancies noticed on verification between the physical stocks and
 the book records were not material.
 
 iii. The company has not taken/granted any loans secured or unsecured
 from/to companies, frms or other parties listed in the register
 maintained under Section 301 of the Companies Act, 1956 and, therefore
 the clauses b, c, d, e, f and g of para (iii) of the Companies
 (Auditors Report) Order 2003 are not applicable.
 
 iv. In our opinion and according to information and explanations given
 to us, the internal control system for purchase of inventory, fixed
 assets and for sale of goods is adequate & commensurate with size of
 the company and present nature of its business. During the course of
 audit we have not observed any continuing failure to correct major
 weaknesses in the internal control system.
 
 v. a. According to the information and explanation given to us, we are
 of the opinion that the particulars of contracts or arrangements that
 need to be entered in the register maintained under section 301 of the
 Companies Act, 1956 have been so entered.  b. According to the
 information and explanation given to us, the transactions made in
 pursuance of contracts or arrangements entered in the register
 maintained under 301 of the Companies Act, 1956 in respect of a party
 during the year relate to services of a specialized nature and hence no
 comparative market prices are available to determine whether it has
 been transacted at prevailing market prices.
 
 vi. In our opinion and according to the information and explanation
 given to us, the provisions of section 58A and 58AA or any other
 relevant provisions of the Companies Act, 1956 and the rules framed
 there under are not applicable as the company has not accepted any
 deposits from the public.
 
 vii. The company has an Internal Audit System and in our opinion, the
 scope and coverage of internal audit is commensurate with size and
 nature of company''s business.
 
 viii. We have carried out a limited review of the books of account and
 cost records maintained by the company, pursuant to the rules made by
 the Central Government for the maintenance of cost records under
 section 209(1)(d) of the Companies Act, 1956 and are of the opinion
 that prima facie, the prescribed accounts and records have been
 maintained. We have not however, made a detailed examination of such
 records with a view to determine whether they are accurate and
 complete.
 
 ix. a. According to the information and explanation given to us, the
 Company is regular in depositing undisputed statutory dues including
 Provident Fund, Investors Education & Protection Fund, Employees State
 Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs
 Duty, Excise Duty, Cess, and any other statutory dues with the
 appropriate authorities.  According to information and explanation
 given to us, there are no undisputed statutory dues outstanding as at
 31st March 2011 for a period of more than six months from the date they
 became payable.  b. According to the information and explanation given
 to us, there are no amounts in respect of Sales Tax, Income Tax,
 Service Tax, Customs Duty, Wealth Tax, Excise Duty or Cess that have
 not been deposited on account of any dispute.
 
 x. In our opinion, the Company has no accumulated losses at the end of
 the financial year and has not incurred any cash losses in the current
 financial year and in the immediately preceding financial year.
 
 xi. In our opinion and according to the information and explanation
 given to us, the Company has not defaulted in payment of its dues to
 Banks and Financial Institutions.
 
 xii. The company has not granted any loans and advances on security of
 shares, debentures and other securities.
 
 xiii. In our opinion, the company is not a Chit Fund, Nidhi or Mutual
 benefit trust/society
 
 xiv. The Company is not dealing or trading in shares, securities,
 debentures and other investments.
 
 xv. According to the information and explanation given to us, the
 Company has not given any corporate guarantee for loans taken by others
 from banks or financial institutions. Hence the requirements of clause
 (xv) of the companies Auditor Report,2003 are not applicable to the
 company.
 
 xvi. According to the information and explanation given to us, the
 Company has applied the term loan for the purpose for which it was
 obtained.
 
 xvii. According to the information and explanation given to us and on
 an overall examination of the Balance Sheet and the Cash Flow Statement
 of the Company, we report that prima facie no funds raised on
 short-term basis have been utilized for any long-term investment
 purposes.
 
 xviii.According to the information and explanation given to us, the
 Company has not made any preferential allotment of shares to parties
 and companies covered in the register maintained under section 301 of
 the Companies Act, 1956.
 
 xix.  The company has not issued any debentures.
 
 xx. According to the information and explanation given to us, the
 Company has not raised any money through public issue.
 
 xxi. According to the information and explanations given to us no
 material frauds on or by the Company has been noticed or reported
 during the year under report.
 
                                               For K.P.RAO & COMPANY
 
                                               Chartered Accountants
 
                                              Firm Regn. No. 003135S
 
                                                      (K. VISWANATH)
 
 Place : New Delhi                                           Partner
 
 Date : August 2, 2011                          Membership No. 22812